JSE-listed mining holding company Assore’s headline earnings for the six months ended December 31, 2014, declined by 59.2% to R990-million, mainly owing to the lower headline earnings recorded by its 50%-owned iron-ore and ferroalloy subsidiary Assmang.

The subsidiary’s headline earnings fell by 60.5% to R1.7-billion in the six months under review.

Assore points out that demand for iron-ore, particularly in China, has been subdued, while significant additional volumes taken to market by Australia and Brazil resulted in selling prices for 62% iron-ore fines delivered to China falling to $82/t – 38.3% lower on average.

“The premium for lumpy grade ores, although lower on average for the six months, had a positive impact on the prices achieved by the group for sales of iron-ore towards the end of the half-year.”

During the period, prices for manganese and chrome ores remained relatively constant, with some minor fluctuations, while prices for manganese alloys declined slightly.

Assore notes that market conditions for all the group’s commodities deteriorated during the period owing to weakening world demand for steel and steel-related products.

The group, however, highlighted that it had benefited from a weaker rand:dollar exchange rate.

Additionally, commissions and technical fees earned by the group declined in line with selling prices achieved on the products of its 50%-owned iron-ore sub- sidiary Assmang.

Sales Volumes

Despite sales volumes of iron-ore into the South African market improving significantly for the period under review, export sales volumes were lower as a result of delays experienced in loading iron-ore vessels at the Port of Saldanha, in the Western Cape.

Sales volumes for the remainder of the group’s products were similar to the previous period.

Capital Expenditure

Capital expenditure at Assmang amounted to R1.7-billion for the period.

The majority of the capital was spent in Assmang’s Manganese division on the expansion of the Black Rock mines’ capacity to four-million tons a year by 2017.

Assmang’s iron-ore division spent R710-million, of which R404-million was spent on waste stripping at its Khumani and Beeshoek mines, in the Northern Cape.

Additionally, R140-million was spent across the group’s chrome assets, with R40-million allocated to the development of underground shafts at Rustenburg Minerals, in the North West.

Construction work at Assmang’s Sakura joint venture ferromanganese smelting project, in Malaysia, in which it has a 54.36% stake, continues.

The project remains on schedule to achieve full design production output of about 170 000 t/y by mid-2016 at an estimated cost of $328-million, of which $155-million has been spent to date.

On December 2, 2014, the group announced that it intended to subscribe for an equity stake of about 30% in Australia-based explorer IronRidge Resources at a cost of R121-million.

IronRidge had planned an initial two-year programme to conduct prospecting for high-grade iron-ore in three separate locations in Gabon.

Outlook
A high level of unpredictability continued to undermine the state of the global economy in a number of different countries around the world.

Chinese economic growth for 2015 was expected to be at its lowest level in more than 20 years, while uncertainty was apparent in Europe, specifically in the eurozone where quantitative easing would soon start and the euro was weakened by political tensions in Greece and the Ukraine.

The Japanese economy was in recession; however, the outlook for India was promising, on the back of recent political changes. These conditions should result in the prices of the group’s products remaining under pressure, with the index price for iron-ore expected to trade between $55/t and $75/t for the short to medium term.

Prices for manganese ores and alloys were expected to remain at depressed levels in the short term.

Some respite on margins was being experienced; however, this was owing to lower freight rates, on the back of the recent collapse in crude oil prices.

Further benefit was being realised by the group on the sale of lumpy iron-ore grades, with spot premiums in this market exceeding $20/t.

The prevailing level of the rand:dollar exchange rate also enhanced the group’s results, relative to previously reported results.